924642--4/1/2010--DIGITAL_ANGEL

related topics

{product, liability, claim}

{property, intellectual, protect}

{stock, price, share}

{product, market, service}

{customer, product, revenue}

{operation, international, foreign}

{tax, income, asset}

{regulation, government, change}

{condition, economic, financial}

{personnel, key, retain}

{debt, indebtedness, cash}

{acquisition, growth, future}

If we fail to continue to meet all applicable Nasdaq Capital Market requirements, our stock could be delisted by the Nasdaq Capital Market. If delisting occurs, it could adversely affect the market liquidity of our common stock and harm our businesses. We have substantial debt and debt service. We have effected or entered into (and will likely continue to effect or enter into) capital raising transactions, acquisitions, legal settlements and contracts for services that involve the issuance of shares of our common stock (or securities convertible into or exchangeable for such shares) and, if such transactions occur, investments in our common stock will be further diluted. Volatility in economic conditions and the financial markets may adversely affect our industry, business and financial performance. Our stock price has reflected a great deal of volatility, including a significant decrease over the past few years. The volatility may mean that, at times, our stockholders may be unable to resell their shares at or above the price at which they acquired them. We rely heavily on revenues derived from sales to various governmental agencies, and the loss of, or a significant reduction in, orders from government agencies could result in significant losses and negative changes to cash flows from operations. Our Animal Identification segment relies heavily on revenue from a principal distributor and two customers and the loss of the principal distributor and customers could negatively affect our revenue, cash flows and results of operations. We depend on a small team of senior management and key employees, and we may have difficulty attracting and retaining additional personnel. Over the past few years, we have made significant changes in the nature and scope of our businesses. Management continues to review strategic alternatives to increase shareholder value, which may result in a further decrease in consolidated revenue and the overall size of our operations. Technological change could cause our products and technology to become obsolete or require the redesign of our products, which could have a material adverse effect on our businesses. We may be subject to costly product liability claims from the use of our systems, which could damage our reputation, impair the marketability of our systems and force us to pay costs and damages that may not be covered by adequate insurance. If others assert that our products infringe their intellectual property rights, we may be drawn into costly disputes and risk paying substantial damages or losing the right to sell our products. We obtain the implantable microchip used in certain of our Animal Identification segment s products from a single supplier, making us vulnerable to supply disruptions that could constrain our sales of such systems and/or increase the per-unit cost of production of the microchip. The expiration or invalidation of patents covering products and technologies in our Animal Identification segment could expose us to potential competition that may have a material adverse effect on our sales and results of operations. Our inability to safeguard our intellectual property may adversely affect our business by causing us to lose a competitive advantage or by forcing us to engage in costly and time-consuming litigation to defend or enforce our rights. We compete with other companies in the visual and electronic identification and locator markets, and the products sold by our competitors could become more popular than our products or render our products obsolete. Infringement by third parties on our intellectual property or development of substantially equivalent proprietary technology by our competitors could negatively affect our businesses. Our efforts to protect our intellectual property may be less effective in some foreign countries where intellectual property rights are not as well protected as in the U.S. Domestic and foreign government regulation and other factors could impair our ability to develop and sell our products in certain markets. Our results of operations may be adversely affected if we write-off additional goodwill and other intangible assets. We face the risk that the value of our inventory may decline before it is sold or that our inventory may not be able to be sold at anticipated prices. Our foreign operations pose additional risks

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924642--4/1/2010--DIGITAL_ANGEL_CORP